“Power”-less Pakistan

Pakistani leaders preoccupied with a Taliban insurgency and political infighting also face an explosive issue that could damage the credibility of governments for years to come: nationwide power outages. Attention was refocused on the energy crisis after recent high profile talks in Washington in which long-time allies, the United States and Pakistan, outlined steps to refurbish power stations in Pakistan.

Many Pakistanis, who face hours of crippling power cuts each day, doubt their government will take decisive action, despite a U.S. warning that the crisis threatens this nuclear armed nation’s economic and political stability.

The promised 4 Es – Employment, Education, Energy, Environment – of the current Pakistan Peoples Party (PPP) government are falling apart. Promises of tackling the recent energy crisis by building 8,000 Megawatts (MW) of new coal, solar, hydroelectric and wind electric generation plants have fallen through the cracks of the proverbial dilatory Pakistani political and bureaucratic elites.

Small towns and villages are experiencing power outages from 20 to 22 hours daily, whereas large cities such as Karachi, Lahore, Hyderabad, Faisalabad, Peshawar and Quetta are without power for at least half of every day as a result of shortages in power generation. An ageing transmission and distribution system, power theft, large commercial losses owing to poor billing and collection systems, and a power tariff scheme in desperate need of revision, are reasons for the current crisis.

With power demand at about 14,680 MW and current supply at 10,200 MW, the power supply shortage stands at 4,480 MW, which provides fertile ground for social and economic chaos.  Nevertheless, despite these “apparent” dire power shortages there is a path forward if only Pakistan embarks on a vigorous action program where it produces energy to its full capacity while ending power theft, improving billings and collections while reducing its technical losses. After researching the gap between the demand and supply and total capacity (19,000 MW) of electricity, we came to the following reasons for the shortage:

1. Hydropower contributes 6,500 MW of energy in the total energy mix of Pakistan. Recent excessively dry seasons, mismanagement and trans-boundary water issues have restricted this capacity to only 1,500 MW. Resulting in a shortage of 4,000 MW.

2. Independent Power Plants (IPPs) produce 6,250 MW. Due to non-payment in the energy pyramid, a circular debt (currently around $1.3 billion) has been created, resulting in a shortage of 1,500 MW.

3. Government owned power generation plants are underutilized. Most of them working way far below their capacity, either because of lack of funds for maintenance or unavailability of spare parts.

4. Power infrastructure, especially in transmission and distribution is old and defective, causing heavy line losses of electricity.

5. Power theft. Public and private theft of power contributes to 32% of the ‘line losses.’

Keeping the above factors in mind, we know that the relevant Pakistani authorities are trying their best to gather foreign financial and technical assistance to address this crisis. A new $125 million USAID Energy Program will upgrade five major power stations, replace more than 11,000 tube wells producing water for agriculture, and boost Pakistan’s overall power production by 10 percent.

In mid-January, U.S. Special Representative for Afghanistan and Pakistan Ambassador Richard C. Holbrooke launched the first phase of these energy projects in Islamabad, announcing the United States will contribute up to $1 billion to the energy sector. Technical support from the U.S. also is being provided by the  private sector, when GE’s CEO, Jeff Immelt met President Asif Ali Zardari last year, resulting in signing a Memorandum of Understanding this year to help Pakistan in the energy, water and transportation sectors.

But the crisis cries out for far more help than that being offered. Pakistan’s energy crisis  which has raged for more than 40 years is more due to ill planning, short sightedness of  successive governments, including the current one, mismanagement and corruption. For the government of Pakistan and the international donor community wanting to help them, here is an agenda of actions that will begin to stabilize the country’s economic and political future.

1. Both, the Sui Northern Gas Pipelines and the Sui Southern Gas Company Limited should make it a priority to produce a 300-400 million cubic feet of gas which is well within their reach if gas tariffs are raised to economic levels. This will provide enough gas to fuel an additional 2,000 MW of electricity in the mix. The circular debt between every company in the electricity mix – PEPCO, WAPDA, IPPs, fuel suppliers and refineries – need to be settled to bring modern accounting practices into the sector. Until this is done there can be no real assessment of the future economic and financial needs of the sector.

2. The power infrastructure should be upgraded with a modern efficient grid. Without such an investment there will be little improvement even if major new generation facilities are built.

3. Accounts receivables from the public and private sector, including the military, for electricity should be recovered. Nothing is ‘free’ and electricity is no different.

4. The relationship of furnace oil and natural gas prices should be monitored closely. Since furnace oil is more expensive, its excessive use has contributed $571 million out of the current $1.3 billion of circular debt.

5. Energy prices throughout the economy must be rationalized and raised to the level required to pay for their full cost while returning a profit to the producers. Where subsidies are required for social reasons they should be targeted and paid for out of government revenues not by energy producers.

6. Government owned power generation companies should be technologically refurbished. This could close the demand and supply gap by 1,500 MW.

7. Finally, Pakistan needs to manage its water resources more efficiently. Historically, Pakistan has been a very ‘water conscious’ country. At independence, despite British efforts to steal its valuable water resources for India, Pakistan obtained access to the headwaters of the Indus and the rivers of the Punjab. The country has made great strides in dealing with water logging and salinity in the world’s largest contiguous irrigation system. During the 1960s, the Harvard Water Program worked closely with Pakistani experts to negotiate the classic Indus Water Treaty. During this time, Pakistani engineers built the giant Tarbela Dam, the largest reservoir in the world formed by an earthen dam. Today, Pakistan faces the “Malthusian-plus” challenge of dealing with rapidly growing water demands (for energy, agriculture and people) from a resource base that is likely to change substantially as the glaciers of the western Himalayas melt and monsoon patterns change under the onslaught of climate change.

We were compelled to write this article to highlight the fact that even if the Taliban and its Pakistani allies were to disappear tomorrow, Pakistan in the absence of a plan to deal with its energy crisis will remain in darkness – literally and figuratively.

If Pakistan is to emerge economically healthy and politically stable, the U.S. must realize, given the stakes involved and its own growing political and military involvement, that its commitment must be a sustained one. One that may need to last for decades not months or years!  

With promises and prospects of a long term engagement, we believe that ‘smart American power’ projection lies in addressing issues such as energy and water. While short term aid and a few promises can start to mend a relationship, sustained partnerships as we have learned in Afghanistan, require a lot more.